Fed's focus is systemic

Economist David H. Wang agreed with Dawson, arguing the major central banks' focus is systemic.

"The Fed, ECB, and Bank of England will address the status of each private bank or organization on a case-by-case basis, based on their implications for systemic risk," Wang said. "AIG is the company in focus right now, but it remains to be seen if the Fed and the U.S. Treasury view its relationships as fundamental to functioning markets. Right now it looks like the U.S. Government is trying to coordinate a private capital infusion for AIG."

AIG's (NYSE: AIG) shares fell 95 cents to $3.78 on Tuesday at mid-day; however, shares are off lows of $1.25 reached earlier in the day.

Both Wang and Dawson cautioned that while maintaining system liquidity and functioning markets are the dominant current concerns, liquid markets will not, in and of themselves, restore GDP growth. Banks and other parties have to resume being willing to lend, "something that will take quarters to resume, given banks' loan losses and the much more cautious lending environment today," Wang said.

Economic Analysis: U.S. Federal Reserve Chairman Ben Bernanke, a former economics professor, is an expert on The Great Depression and the U.S. Federal Reserve's response to it. In that sense, Bernanke has perhaps the best background given the current crisis. In the weeks and months ahead, Bernanke's judgment calls will be complex and difficult: failure of which institutions would represent system risk? How to rescue a key institution without condoning a bad business model or practice? Then, after the crisis has been resolved, what regulatory reforms does the Fed lobby the U.S. Congress for?

The aforementioned are enormous decisions, but the view from here is that Benanke and the Fed's economists will be up to the task.